The Navy Modernization Program: Estimating the Cost of Upgrading - PowerPoint PPT Presentation

The Navy Modernization Program: Estimating the Cost of Upgrading AEGIS Guided Missile Cruisers Jeremy Goucher, Herren Associates Krystian Jenkins, Naval Surface Warfare Center 11 June 2015 1

Agenda  Background  Induction Phase  Sustainment Phase  Hull, Mechanical, and Electrical (HM&E) Mid Life Extension (MLE) – Scope – Data Sources – Assumptions – Methodology – Calculations  Combat System (CS) Modernization – Scope – Data Sources – Assumptions – Methodology – Calculations  Summary Results  Conclusions 2

Background  Navy plans to modernize 84 total AEGIS warships over a 20 year period at a cost of $16B (CY10$) 1  Eleven of the CG 47 Class AEGIS Guided Missile Cruisers will receive an extended availability, including ship maintenance, HM&E MLE and CS Modernization  Refferred to as Phased Modernization, the program will include the following phases: – Induction: Ship is taken out of the fleet and de-activated – Sustainment: A periodic assessment is conducted on board to ensure the ship is not experiencing any damage or fatigue – HM&E Modernization (MLE): Hull, mechanical, and electrical equipment are upgraded – CS Modernization: Combat Systems are upgraded  The NAVSEA In Service Surface Combatants Program Office (PMS 400F) tasked the Cost Estimating and Industrial Analysis Group (SEA 05C) with developing a cost estimate for the phased modernization program 1. http://www.history.navy.mil/library/online/aegis_background.htm 3

Induction  Induction phase takes place at the start of the availability and again after the HM&E modernization phase  Ship is deactivated; engineers perform ship assessment and identify repairs that will being needed during modernization phases  Assumptions – SURFMEPP measure of man-days required for this phase is accurate – Historical industry labor rates are reflective of future industry labor rates  Cost Estimating Methodology is Engineering Build Up; data source is Surface Maintenance Engineering Planning Program (SURFMEPP)  Calculations – Man-Days x Labor Rates = Cost 4

Sustainment  Sustainment phase takes place after induction and prior to modernization phases and can last from a few months to years  Engineers perform ship assessment and identify any damage or fatigue that the ship is incurring as a result of being deactivated for an extended period of time  Assumptions – SURFMEPP measure of man-days required for this phase is accurate – Historical industry labor rates are reflective of future industry labor rates  Cost Estimating Methodology is Engineering Build Up; data source is Surface Maintenance Engineering Planning Program (SURFMEPP)  Calculations – Man-Days x Labor Rates = Cost 5

HM&E MLE Scope & Data  HM&E MLE is the process of upgrading the hull, mechanical, and electrical systems  Considerations for the cost estimate included approved ship alterations (SHIPALTS), maintenance, dockside support, advanced planning, design services agent, and long lead- time material  Data Sources: – Historical execution plans – Cost and Schedule Status Reports (CSSR) • 14 CSSRs were collected from shipyards in San Diego, Norfolk, and Pearl Harbor • Analyzing CSSRs resulted in a range of historical cost and hours per SHIPALT – Shipyard proposals – SURFMEPP Analysis • Used for estimating maintenance cost 6

HM&E MLE Assumptions  Assumptions – No further scope required beyond the data available • Every ship is in a different state of maintenance and it is impossible for the cost team to predict the required maintenance – Advanced planning is a fixed percentage of total HM&E Modernization cost – No alterations require a different level of long lead-time materials than what were historically required – Total subcontractor cost captured in a CSSR includes the same ratio of materials to labor as the prime contractor – SHIPALTS not completed during the HM&E availability will not be completed in other phases of the phased modernization program – HM&E schedule will not be extended to accommodate schedule slips or expanded scope – Maintenance engineers will perform as much maintenance as possible within the allotted schedule and incomplete maintenance activities will be deferred to a later availability – Historical industry labor rates are reflective of future industry labor rates 7

HM&E MLE Historical Maintenance  Maintenance requirements are historically estimated during each Program Objective Memorandum (POM) cycle  Historically, maintenance requests increase during each cycle  This is interpreted as maintenance activities being delayed because they were not completed within their scheduled availability 8

HM&E MLE Methodology & Calculations  Cost Estimating Methodology – Advanced Planning – Extrapolation from Actuals – Long Lead Time Materials – Extrapolation from Actuals – DSA – Extrapolation from Actuals – SHIPALTS – Analogy to previous ship alterations – Superstructure Fatigue – Engineering Build Up – Maintenance and Support – Engineering Build Up  Calculations – Advanced Planning: Developed a CER between AP and HM&E MLE based on historical AP cost for the CG 47 modernization program; MLE x CER = Cost – Long Lead Time Materials: Averaged across historical actuals – DSA: Averaged across historical actuals – ShipAlts: Averaged across historical actuals • In the case no actuals were available, interviewed SMEs to develop an analogous estimates for similar historical ShipAlts – Superstructure Fatigue: Analyzed shipyard proposals and developed independent estimate based on proposal inputs – Maintenance and Support: SURFMEPP man-days x Labor Rate = Cost 9

HM&E MLE Shipyard Support Cost 10

CS Modernization Scope  Scope – Procurement – Combat System Engineering Agent Support (CSEA) – Design Services Agent (DSA) – Installation – Sea Trials – Combat System Ship Qualification Test AEGIS Non-AEGIS Displays Moriah Processors CKT16TV & Topside STAMO SPA-25H Computing Infrastructure SPQ-9B AEGIS AMOD Upgrade VLS Upgrade RCEM GWS Upgrade SPQ-15 CEC TWT Monitoring Circuit ICOMM MK-666 LAMPS (Install Only) BFTT (Install Only) SQQ-89 11

Combat System Modernization  Data Collection – Procurement • Contract Values • Form 7300s • Task Planning Sheets – CSEA • Task Planning Sheets – DSA • Task Planning Sheets – Installation • Historical Contract Performance Reports – Sea Trials • Test Procedures and FTE Requirements – CSSQT • Task Planning Sheets 12

CS Modernization Assumptions  Global Assumptions – The 2014 OSD Joint Inflation Calculator is reflective of future inflation rates – Historical rates, contract prices, CPRs, and actuals are representative of future cost for the same work package  Procurement – TPS allocations are representative of the actual cost required for support services – The effective award date of the contract is the same fiscal year as the funds that were obligated for the award (relevant to inflation adjustments) – ACB 16 and ACB 20 variants will be no more expensive on average to procure, install, and test then ACB 12  Installations – Contractor fee is 10%  Test Team – Aegis Test Team works a 40 hour week • AEGIS Sea Trials analysis was conducted on a person-week basis  Risk Assumptions – Sample populations are bounded at the 10 th percentile by an amount which is 20% below the point estimate – Sample populations are bounded at the 90 th percentile by an amounts which is 20% above the point estimate – There is a 30% correlation between risk inputs 13

CS Modernization Methodology Matrix WBS Methodology Data Comments System Extrapolation from Contract Award Procurement Actuals CSEA Support Engineering Build FTE/Labor Scope and FTE analysis Up Rates from TPSs DSA Engineering Build FTE/Labor Scope and FTE analysis Up Rates from TPSs Installation Extrapolation from CPRs Actuals Sea Trials Engineering Build FTE/Labor Detailed FTE and Scope Up Rates Analysis from external studies CSSQT Engineering Build FTE/Labor Scope and FTE analysis Up Rates from TPSs 14

CS Modernization Calculations  Procurement – PMP: Sum of CLIN award prices – Gov’t Support: FTEs * Labor Rate  CSEA: FTEs * Labor Rate  DSA: FTEs * Labor Rate  Installation: Future cost = historical cost  Sea Trials: FTEs * Labor Rate  CSSQT: FTEs * Labor Rate  Risk: Monte Carlo Simulation using 10,000 trails – S Curve and Tornado Chart Analysis 15

Summary Results S Curve Induction Sustainment CV: 7.6% Combat System Modernization HM&E MLE 16

Conclusions  Sufficient data and information is available to estimate the cost of the CG 47 Phased Modernization with a high level of detail  Contracting strategies including competition, learning curve discounts, and economic order quantity discounts could reduce the program cost  The estimate serves as a baseline for future AEGIS modernization efforts  This estimate provides a framework for estimating modernization efforts for non-AEGIS platforms 17

Acknowledgements Tim Lawless, SEA 05C Jay Black, HHS Phil McCormick, NSWC Carderock Ann Hawpe, Herren Associates Becky Galbo, Herren Associates 18